Sanctions teach Iran industry a hard lesson

Sanctions have taught Iran a stark lesson: It’s time to own and manage development work in the country’s massive energy sector without reliance on foreigners.

The history of Iran’s oil industry has a number of thought-provoking chapters, including the country’s business with oil and gas supermajor BP.

The British multinational company has its origins in Iran when it was established in 1908 as Anglo-Persian Oil Company as the Middle East’s first oil well was struck in Masjed Soleyman.

The company went on to grow and become sturdy as it basked in the luxury of exceptional privileges which were profusely accorded to the colonial UK and its entities.

Three decades later, it had expanded beyond the Middle East to Alaska under the name of the Anglo-Iranian Oil Company but it was then that the company crossed Iranians out of the picture and became British Petroleum.

BP has been actively involved in Iran’s energy development projects for decades as both sides have pursued their own businesses but the bitter truth is that the country still has to rely on a company which it created.

But it was only when sanctions weighed on Iran and no major international company remained to continue the job in 2011 that the country started to realize its liability.

Recent openings in the wake of nuclear negotiations have raised hopes among international companies for return to Iran but Iranian officials say they have prepared new contract models which are based on active partnership of Iranian firms and transfer of technology.

While giving better incentives, Iran wants foreign companies to tie up in joint ventures with local firms and share technology and management in return.

“They will have the incentive to produce more, and to transfer the technology,” deputy head of investment and finance at the National Iranian Oil Co. Ali Kardor has said.

Formerly, Iran engaged in buy-back deals with international firms under which the companies would recoup their spending and fees from production when a field became operational.

Officials say new contracts would allow companies to enter into partnership with local firms which would provide services, build pipelines and drill fields.

Minister of Petroleum Bijan Zangeneh says the new contracts are enhanced oil recovery (EOR) and improved oil recovery (IOR) models. The ministry has not offered the fields but they reportedly count as many as 70.

Zangeneh has said Iran plans to raise recovery by 500,000 barrels per day (bpd) within two months after removal of sanctions and 1 million bpd after six months.

“Some companies think we want money. No, our issue is not merely money. Our most important need is technology and any procurement from Western companies must be done so that it leads to transfer of technology and strengthening of national know-how,” he said this week.

In his recent talks with foreign energy managers, he made it clear that the environment for their operation in Iran has totally changed after the sanctions, Zangeneh said.

“I have told foreign oil companies that Iran’s situation has changed very much compared with 10 years ago and the capabilities of Iranian manufacturers have become very strong under the sanctions.”